How does one choose a financial adviser? Are there any guidelines for the amounts they can charge? Are there advisers who specialise in advising clients who work in specific fields (for example, health care)? Although I have had advice from advisers in the past, they were mostly for insurance policies. However, I now need a retirement planning adviser.

Name withheld

Ronald King, the head of strategic research and support at PSG, replies: Your financial adviser will be responsible for choosing the underlying assets that make up your investment portfolio. It’s not just a matter of picking four or five stocks that are likely to earn the best returns; your adviser must have a holistic view of your overall financial position. Your adviser must have the knowledge and skill to set up a comprehensive financial plan.

There is no fool-proof way of choosing a person or firm to manage your financial affairs. Each client needs an adviser who has the right skills to service his or her needs. There are, however, a few important criteria you can use to ascertain the calibre of an adviser.

• Service. Many investors have financial plans that are out of date. Your financial adviser should interact with you at least once a year to review your financial situation and ensure that your plan is still appropriate in the light of how your investments have performed and the macro-economic context. If your circumstances or needs have changed, so should your financial plan.

• Qualifications. “Policy hawkers” with nothing more than a matric certificate are a thing of the past. The intersection of economics, legislation and the individual client’s unique circumstances make financial advice one of the most complex professions. Financial advisers are expected to fulfil the role of economist, law expert and psychologist.

There are various qualifications that equip a person to be an effective financial adviser. The best and most comprehensive is the Postgraduate Diploma in Financial Planning, on offer at most of South Africa’s major universities. If an adviser also holds the Certified Financial Planner certification, you can rest assured that he or she has agreed to be bound by a strict code of conduct set by the Financial Planning Institute.

• Experience. Some aspects of financial planning can be learnt only by experience. The longer a planner has been servicing clients, and the more evidence he or she can present that his or her methods have worked, the better.

• Support network. This is an essential part of any financial adviser’s services, for three reasons. First, when things go wrong, as they sometimes do, you want to make sure your adviser is not standing alone when the issue of compensation arises. The bigger the organisation, the better your chances of being compensated if you suffer damages. Second, a good support network facilitates good client service – having well-trained assistants will notably increase the level of service you receive. Finally, because of the sheer amount of information they must process and retain – which is the very reason they add value to clients – advisers with a competent, well-resourced support team can ensure that information is properly assimilated.

• Independence – not as essential, as some would have you believe, but still important. The more products that are offered to clients, the more a financial adviser must know. An adviser should be able to choose from a range of product providers, or have a support team to compare products.

At the end of the day, the best financial planner is one who is thoroughly acquainted with your needs and circumstances and goes out of his or her way to ensure that your financial plan will enable you to attain your goals.


I would like to start building a long-term share portfolio. Do you have any tips to get me started?

Name withheld

Grant Meintjes, the head of securities at PSG Wealth, replies: The first step is to determine whether you want to invest in local or international shares. Thereafter, the factors to consider include your age (and when you plan to access your capital), the amount you have available to invest, your projected capital needs, and the other financial resources you have available, such as discretionary investments and long-term savings.

Most investors are classified as either conservative or aggressive. Conservative investors tend to prioritise protecting their capital and maintaining the value of their investments, while aggressive investors are comfortable with a medium to high degree of risk and can stomach volatility in exchange for potentially higher returns over the long term. You need to decide what your risk appetite is.

Keep diversification in mind when constructing your portfolio. Hedge your capital against the risks in certain market sectors by investing across a number of different sectors.

When deciding on the shares in which to invest, you must consider a share’s fundamentals, which means analysing the company’s qualitative and quantitative data to determine the share’s intrinsic value. Consider whether the company is growing its revenue, whether it is turning a profit, how strong its competitive advantage is, and how much debt it holds. These are only some of the key considerations before deciding where to invest your money.

Once you begin investing, try not to be overly concerned with the day-to-day performance of the individual shares. Let your investment grow, and avoid selling any shares within the first year. Keep your purpose clear in your mind, which is to think long term and not to touch the capital for at least five years.


I am a 65-year-old pensioner who lives with my 70-year-old spouse, who is a state pensioner, in our fully paid for property. I have a living annuity with Allan Gray that provides me with a monthly pension of R1 878 (5% of the two-thirds lump sum).

My spouse’s monthly pension covers our living expenses; my contribution of R1 878 makes very little difference.

My concern is that, if my spouse should die before me, his pension will reduce by 50%. In order for me to maintain my standard of living and medical cover, I would have to find additional income.

I am seriously considering the following option: instead of watching my capital being eroded over time, use the capital to erect a two-bedroomed cottage on our property and rent it out to students. In this way, I’ll generate a far better income, and the value of the property will appreciate, unlike the annuity income, which will eventually run out. The monthly annuity is just too small to be put to good use and so is “wasted” on unimportant or insignificant purchases every month.

My question is: how can I access the capital (R400 000) in my retirement fund?

Name withheld

Marius Cornelissen, a financial adviser at PSG Wealth in Menlyn, Pretoria, replies: Legislation does not allow for the capital in a living annuity to be fully withdrawn, unless it falls below certain amounts. In your case, the capital would need to be less than R50 000.

The only way to access a larger amount is to increase your annual withdrawals to the maximum limit of 17.5%. This could have tax consequences, and it will take many years for the value to fall below R50 000.


I took out a Liberty Active Annuity Fund policy in 2006. The initial premium was R300, increasing by 10% annually. In 2008, I was retrenched. I was over-indebted and had no income, so I stopped paying the premiums. The policy is dormant. It had a value of just over R10 000 at the end of February. I am now employed and want to invest in a retirement annuity (RA) from a different provider.

Am I allowed to ask Liberty to transfer the money in the dormant RA to the new RA, or can the Liberty RA be cashed out only when I retire?

Freddy Masondo

Magdeleen Cornelissen, a financial adviser at PSG Wealth in Menlyn, Pretoria, replies: You are allowed to request that your Liberty RA is transferred to another RA fund. This is a section 14 transfer, where the retirement fund benefits from one fund are transferred to another fund in terms of section 14 of the Pension Funds Act. This process can be lengthy, because there are legislative requirements to which the parties involved must adhere.

It is important to consider the potential implications of the transfer. I advise you to ask Liberty for a section 14 transfer quotation. The quotation will reflect your transfer value, as well as any penalties that might be applicable. Ask the provider of your new RA whether it will be able to combine the amount that is transferred with your contributions to the new fund.